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Shredded surplus weighs down Midwest prices

Keywords: Tags  Midwest Ferrous Scrap Index, shredded scrap, busheling, heavy melt, plate and structural, Sean Davidson

NEW YORK — Midwest shredded scrap prices suffered another poor month as excess supply drove prices down further to make it the weakest grade in August.

Market participants in Illinois, Indiana, Michigan and Missouri said reported deals for shred were down between $10 and $20 per gross ton from July levels, with prices weakest in the Detroit area.

With the exception of Detroit, the overall Midwest region traded shred at $10 to $15 lower per ton on average, while prime scrap such as No. 1 busheling traded sideways. Weaker shred prices sent the differential between busheling and shred to historical levels of around $40 per ton, and some markets even sent it below the price of 5-foot plate and structural scrap, sources said.

Chicago-area mills set the tone as they entered the August market first to trade sideways on obsolete and prime grades and down about $10 per ton on shred from July levels.

While mills served by the St. Louis area mostly followed suit, Detroit-area mills were able to negotiate some additional price drops on most grades and Indiana mills reportedly traded between the trends of Chicago and Detroit.

As a result, AMM’s Midwest Ferrous Scrap Index for No. 1 busheling settled Aug. 12 at $409.95 per gross ton, down 79 cents from July 10, while the Midwest Ferrous Scrap Index for shred settled at $368.85 per ton, down 3.2 percent from $381.06 in the same comparison, creating a $41.10 differential. Only a few months ago, the two grades traded on par with each other, but the widening gap came as no surprise to market participants.

"When July purchases were completed, the mills claimed there was a fair amount of unsold shred still available. And it was pretty universal geographically. With the better July prices, the inflow of shred feed increased. The net result as perceived by mill purchasing agents was a very abundant supply of shred sitting in the hands of ready sellers," one source said. "When they entered the market at down $10 to $15 for shred, there was very little resistance."

Despite falling shred prices, other obsolete grades such as No. 1 heavy melt and plate and structural held their own because of tighter supply, due partly to shredders consuming those grades as raw material.

In many Midwest markets plate and structural, which typically sells below the value of shred, reportedly traded on par or up to $5 per ton over the price of shred at prices mostly unchanged from July. No. 1 heavy melt prices, meanwhile, slipped slightly as some mills used the sideways market to narrow price ranges. As a result, AMM’s Midwest Ferrous Scrap Index for No. 1 heavy melt settled Aug. 12 at $354.18 per ton, down $1.89 from a month earlier.

"The current pricing dynamic is strictly supply-demand related. There are more tons of shred available compared to demand. P&S (plate and structural) is a little tighter in overall supply so it is commanding a slightly higher price. I would imagine that it will change as more parties adjust their melt mixes to substitute lower-cost materials and the supply tightens up as a result," one mill buyer said.

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